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Crunching the Numbers-Debt is making me sick to stomach:( [#permalink]

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26 Mar 2008, 21:15

Oh man..it is finally starting to hit me. I got into my school of choice and was looking forward to going back this fall..However, I was just crunching the numbers tonight and reality is starting to set in. I didn't think anything of the debt before..maybe it was irrational exuberance since I was so gung ho about school, but now that I have figured out exactly how much I will need and how much the payments will be, I am having serious reservations..especially since I want to do finance after I graduate and who knows how many jobs there will be in that sector after graduation. $900 for ten years scares the crap outta me. and makes me sick to my stomach..oh if I extend it I can pay around 630-640 dollars for 30 years. I may just do a PT program instead. At least I can pay as I go with those programs.

Re: Crunching the Numbers-Debt is making me sick to stomach:( [#permalink]

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27 Mar 2008, 08:23

I know..it's just the fact that $900 a month for 10 years is scary. I will have about the same amount of debt as the average starting salary for my school (85k). I am hoping that it will pay dividends, but you look at salary stats and you do see some lowball numbers..I have even seen on Chicago's website where some students come out and are making 40k a year. If it doesn't pay dividends, then you are screwed. This is not an investment that you can cut your losses and walk away from.

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27 Mar 2008, 09:16

RobertoJose82 wrote:

I know..it's just the fact that $900 a month for 10 years is scary. I will have about the same amount of debt as the average starting salary for my school (85k). I am hoping that it will pay dividends, but you look at salary stats and you do see some lowball numbers..I have even seen on Chicago's website where some students come out and are making 40k a year. If it doesn't pay dividends, then you are screwed. This is not an investment that you can cut your losses and walk away from.

It really is scary. That is why most people do not think it is worth the trouble beyond the top 15 schools, b/c the chance of landing a plum job is reduced drastically.

On the other hand, you can land a nice IB gig and knock out the entire loan with your first year bonus. You just have to slum it for the first year or two.

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27 Mar 2008, 10:33

Yeah I am having second thoughts. My school doesn't have a lot of Ibanks recruiting there..not sure if I would want to subject myself to that life anyways. Worst case scenario if things don't work out, I can always flee the country:)

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27 Mar 2008, 20:29

I am having those same doubts..but you said you were in a top 25 so I think you should be ok. I got into a borderline 50 school..according to US News and am having doubts about going now too since I will come out close to 70k in debt.

Re: Crunching the Numbers-Debt is making me sick to stomach:( [#permalink]

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27 Mar 2008, 21:39

I just found out something that may change my mind tonight..actually within the last twenty minutes. The federal government will have something called an income based repayment plan come 2009..it was part of the student loan reform package passed last year.. Basically it will tie the amount of payment to your income and its based on the poverty line. Still, if you come out and can only get a job for 40 a year, you won't be stuck with 900 a month payments. Your capped payment would be something like 300 a month which is fair. The interest would still accrue and capitalize..but regardless after 25 years the remaining debt would be cancelled out. The good thing is there is a time limit for the debt. The bad thing is it can grow to a huge amount and you may not be able to pay it off before the 25 years if the interest gets a little crazy..There is a calculator to calculate the maximum amount of your payment..since the payment is tied to poverty line..if you really want to get creative..you can go out and make a lot of babies with your wife and won't have to pay a thing..

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27 Mar 2008, 21:59

let's put it this way, consider it buying a Ferrari (or insert any hot sports car of your choice here), but being able to drive it and enjoy it for life... and require no maintenance. That should make the $900/month payment feel better. _________________

Re: Crunching the Numbers-Debt is making me sick to stomach:( [#permalink]

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28 Mar 2008, 15:11

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One thing that may be worth considering is that the lowball salaries at the top schools (like 40k out of GSB) are probably people who went into nonprofit or entrepreneurial roles. A lot of people also choose to sacrifice pay for lower income jobs because of their particular passion.

Also, if you keep in mind that the average signing bonus coming out of a top 10 school is around $20k, with proper money management you could probably have half your loans paid off in the first year. If you have $80k in debt and get a 20k signing bonus, and have the self-discipline to apply that bonus to your debt, voila! they're 25% reduced, and you just shaved several years of payments off.

Basically, rather than looking at ranges and considering the worst case scenario, consider what job you really want to have coming out of the program. Do some research and figure out what that job generally earns in the areas you hope to live (particularly for career switchers, it should be pretty straightforward to get a reasonable range for an entry level with an MBA salary in any standard field), and review your school's numbers on various careers to get an idea on the salary range for that career for your particular school. Most schools have pretty extensive breakdowns in their employment report of salaries by job function, industry, region, etc. Keep in mind that if you're a career switcher, you'll be towards the bottom of the range for your particular field (not necessarily towards the bottom of the overall salary range, depending on the career you choose) and if you're just augmenting your current career, you're likely to be towards the middle to top of the range. But don't consider the $40k nonprofit salary if you're definitely not going into the nonprofit sector. Similarly, don't assume that you'll earn $150k as a consultant without any experience.

Obviously, if you're interested in entrepreneurial work or the nonprofit sector after school, your mileage may vary, but keep in mind that a lot of programs also have loan help programs for those going into government or nonprofit work.

And, as several folks have mentioned, your MBA is an investment. With a couple good bonuses (even normal old bonuses, not the astronomical I-banking bonuses), you'll be amazed how quickly you can pay off the debt. It's definitely, definitely worth another close look before you give up on your dream school to avoid the debt.

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10 Apr 2008, 12:45

RobertoJose82 wrote:

$900 for ten years scares the crap outta me. and makes me sick to my stomach..oh if I extend it I can pay around 630-640 dollars for 30 years. I may just do a PT program instead. At least I can pay as I go with those programs.

Dear God. I don't know if this makes you feel any better, but my wife and I are both going back to graduate school. I've been running the numbers to get a good feel for our budget. Just based on Cost of Attendance (assuming we can stay within that range, which we may be able to do since we're thrifty), we're at: